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This article appeared in the
February 5, 1999 issue of Executive Intelligence
Review.
The
following article, by Lyndon H. LaRouche, Jr., appeared in the Russian
periodical Kommersant-Vlast on Jan. 26, under the headline, "Lyndon
LaRouche, Economist: Scrap the Foolish IMF Package!"
Since 1991, successive Russian governments have been following the
prescriptions of the IMF for the decontrol of prices, radical economic and
financial liberalization, and indiscriminate opening of markets to imported
products. The basic result has been to transform Russia into a raw materials
producer, rather than an agro-industrial country. The collapse of the financial
system ultimately led to default. You could say, that a whole era of the world
financial system based on radical free trade and globalization, ended on August
17th, 1998, with that Russian default.
The world is experiencing an ongoing global economic, monetary and financial
disintegration process. Its first phase was the series of financial disasters
in Southeast Asia. The second phase can be dated to Aug. 17, 1998 in Russia.
The dramatic collapse of the Brazilian real should be seen as marking the onset
of the third phase.
To those who wish to prevent the blowout of the world financial system, I
say: There is only one short-term measure which could bring the chain-reaction
factor--the capital-flight factor--under control. That is immediate
introduction of capital and exchange controls, followed by steps toward
establishing a new international monetary order modelled upon the pre-1958
phase of the Bretton Woods system. Malaysia's Mahathir was right about almost
everything. Unleash capital and exchange controls now. Scrap the foolish
package of measures, proposed by the IMF. If you don't, you will soon see what
you get!
One of the leading consequences of the collapse of the $41.5 billion
Brazilian "rescue package" is the utter discreditation of the IMF, which had
announced the package in early November 1998. Ever since the August 1997 IMF
bailout package for Thailand, such IMF-led actions for Indonesia, South Korea,
Russia, Ukraine and now Brazil, have all proven to be economic, social and
financial disasters for the nations concerned, while at the same time saving
the lives of the private creditors, who were promptly bailed out. Since the
Thai "rescue" package, the IMF has committed an unprecedented $180 billions to
such actions. In each case, the IMF demanded severe budget cuts, slashing
living standards of the population and depressing the real economy.
There are five leading factors for Russia's economic reconstruction:
First. Natural monopolies, those associated with the processing of primary
mineral resources and, also, large-scale infrastructure systems for mass
transport, power generation and distribution.
Second. Machine-building capabilities, with a special emphasis on surviving
Russian capabilities from the former Soviet military-scientific industrial
complex, which is the one sector of the Russian economy that can provide the
core of that economy's ability to generate high rates of growth of the labor
productivity.
Third. Other industrial capabilities that can be revived, expanded, and
improved, to provide most of the requirements of Russia's population.
Fourth. Agriculture, which must be developed to secure domestic
self-sufficiency. The failures of agriculture were the Achilles' heel of the
former Soviet Union.
Fifth. Russia's Arctic regions, which have vast natural resources. The
Russian North represents the natural economic frontier of Russia's future,
which could have an enormous positive impact on the economic future of Asia as
a whole.
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